The Tanaiste, Ms Harney, is prepared to prioritise public services, particularly the health system, ahead of tax cuts in the next Budget.
A spokesman for the Progressive Democrats' leader said yesterday there was "no great disagreement" between Ms Harney and the Minister for Finance, Mr McCreevy, who indicated over the weekend a switch from tax cuts to spending on public services in the December Budget.
The Government appears to be uniting behind the aim of reversing any impression that its budgetary policy has favoured the well off. Ministers are particularly concerned about public reaction over the state of the health services.
Upon taking office, the Coalition pledged to reduce the top rate of tax from 48 to 42 per cent and the bottom rate from 26 to 20 per cent. Circumstances permitting, they said, the top rate would be reduced to 40 per cent. With the rates currently standing at 42 and 20 per cent, they have largely achieved this.
However, it is understood both Mr McCreevy and Ms Harney want to reduce the top rate to 40 per cent in the next Budget, which would cost £150 million. The Tanaiste has said one of her priorities in the next Budget is to take everyone earning below £200 a week out of the tax net.
Last week the Conference of Religious in Ireland criticised the Government over growing income inequalities, saying economic measures had unfairly favoured the better off.
Both the PDs and Fianna Fail, said Ms Harney's spokesman, were committed to improving public services and it was a question of prioritising as the decisions are made in advance of the Budget.
Mr McCreevy said over the weekend that when people thought about the Budget they tended to debate what would be done in terms of taxation, but it now had to be about what quality of health and transport services people wanted.
The Minister has said previously that money to be spent on health would have to be evaluated and taken into the context of budgetary strategy and the overall economic situation.
A Cabinet colleague said yesterday that Mr McCreevy has been telling other ministers that if they want additional funding for the beleaguered health services they would have to face "cuts across the board" to finance it.
Another said there was no decision yet on the matter, but Mr McCreevy was "reflecting a fairly common view about health", and taking into account the changing economic circumstances and the reprimand from the European Commission.
"The general election is not going to be fought on the basis of tax cuts, given the economy and the frustration with the health services," said one source.